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GrainCorp warns of infrastructure cuts

GrainCorp CEO Alison Watkins has resigned to take up a management job with Coca-Cola Amatil.

AAP: Dan Lewins

GrainCorp may cut some of its receival and storage services in regional areas, in the wake of the veto of the $3.4 billion takeover bid from American company Archer Daniels Midland.

Three days after Treasurer Joe Hockey blocked the bid, the east coast grain handler's chief executive Alison Watkins has resigned, to take up a position as group managing director at another food company, Coca-Cola Amatil.

GrainCorp chairman Don Taylor says the company will now need to sell some unprofitable infrastructure, but won't be parting with its global malting business and Australian oil seed crushing operations.

"No certainly not. They're part of our long-term strategy in terms of diversifying our income base and are very much vital to our long-term strategy, so absolutely not.

"The rationalisation is simply around the storage and handling country networks. That's where that rationalisation is focused.

"What was offered by ADM was an awful lot of free money which went to that upgrade.

"Certainly we're going to have to spend some capital, but our capital capacity is not of that order."

Mr Taylor says the Treasurer was wrong when he said GrainCorp's handling was a monopoly.

"A lot spoken during the preamble to the Treasurer's decision was factually incorrect.

"We face enormous competition. Up to 50 per cent of the grain never even comes to our depots.

"And the stuff that comes to our depots has other opportunities to go elsewhere.

"We have growers setting up their own storage, putting grain in sausage bags. There are 140 buyers every day looking for grain."

Ms Watkins has already found a lucrative new job with another food company, Coca-Cola Amatil.

In a statement to the sharemarket today, GrainCorp chairman Don Taylor said the company has accepted Ms Watkins' resignation "with great regret".

"The expectation in the investment community was that ADM's offer for GrainCorp would be approved and effected in the near term," Mr Taylor said.

"In that context, it is not surprising that an executive of Alison's calibre has attracted interest and had new opportunities presented to her.

"As much as we regret her decision, we wish her every success in the next stage of her career.

"Alison leaves a lasting legacy at GrainCorp; our business has sharpened its strategic focus, diversified its earnings base and made sound progress on our initiatives to deliver an additional $110 million of underlying earnings."

Ms Watkins will step down at the end of January, and in a statement issued to the ASX said the decision to leave the company had been "enormously difficult" and "made with great sadness".

I feel it is in the best interests of GrainCorp, our people and customers that I move on now and allow the board to find new leadership.

Alison Watkins, CEO, GrainCorp

"I had planned to leave the company at the time control passed over to ADM. Given last week's unexpected developments, I feel it is in the best interests of GrainCorp, our people and customers that I move on now and allow the board to find new leadership to take the business forward into its new phase."

Shortly after this statement, Coca-Cola Amatil Limited (CCA) announced the appointment of Ms Watkins as its group managing director, a position she's due to take up on March 3.

The Treasurer's decision to block the sale of Australia's largest agribusiness to American food giant ADM took many by surprise on Friday, with GrainCorp's share price plunging as the market reacted.

There had been a wide expectation that Mr Hockey would approve the deal with conditions, although his National Party and rural Liberal colleagues had all spoken vocally against the sale.

Instead, Mr Hockey announced that, with the grains industry still in a period of post-deregulation transition, now was not the time to allow such a significant player in grains storage, transport and export to be sold in its entirety to a foreign buyer.

He also said that he wasn't satisfied that there were any conditions that could be placed on the sale that would alleviate his concerns.

Agribusiness analyst with Pac Partners, Paul Jensz, says the oilseed crushing business and global malting barley investments will be the focus for GrainCorp.

"The strategy, I think, will be to get grinding efficiencies over the investments of over a billion dollars.

"They've tried to smooth out their earnings through the cycle. They now need to lower their cost base both here and offshore, and improve their services here and offshore.

Meanwhile, as trade ministers from around the region gather in Bali for agricultural trade talks, one trade consultant says the GrainCorp decision is unlikely to materially affect Australia's ongoing free trade negotiations.

Alan Oxley, also the chair of RMIT's APEC Studies Centre, says the Treasurer's decision to scuttle ADM's GrainCorp bid may raise questions for China, which is seeking expanded investment opportunity in Australia as part of free trade negotiations, but he doesn't think it will be a deal-breaker.

"I don't think the Chinese will be so focused on that question. The Chinese will be more interested on getting greater access, say that billion-dollar investment level, and perhaps some lesser control on state-owned enterprises," he said.

"I doubt our decision on ADM would affect the negotiations with the China agreement."

Mr Oxley says the government's decision won't necessarily make already tricky free trade negotiations Japan and South Korea much harder either, with Australia already likely to be offering the same foreign investment deal to those countries that it offered the US: a billion dollar threshold for foreign investment, before extra scrutiny is required.

"[Japan and South Korea] wouldn't be fazed with the Archer Daniels Midland decision," Mr Oxley said.

"Now the TPP agreement [the Trans-Pacific Partnership (TPP) agreement], there's very little chance that can be completed by the end of this year. The administration's been talking about that, but I don't know any serious trade negotiators who think that's achievable.